How Gold and Sullivan ‘trouser’ £50k-per-week from West Ham

Blowing Bubbles reviews the club’s latest accounts and finds a few surprises

West Ham’s financial accounts for 2017 show a record turnover and record profit but mostly due to the new TV deal which came in last season. The accounts published at companies house in March this year show figures for last season up to 31 May 2017.

The main areas show a turnover increase of 28.9 per cent (£41.2m) from £142.1m to £183.3m and that TV income grew by 37 per cent (£32.6m) from £86.7m to £119.3m. This is in line with many other Premier League clubs when the new Sky/BT deal came into effect last season.

Most clubs have also increased their turnover by a similar amount so it could be argued it is a level playing field. Another area highlighted was ticket income grew by 6.3 per cent from £26.9m to £28.6m. The modest increase might be a surprise and disappointment to many but with 10,000 Under 16 season tickets for £99, 8,000 Band 5 season tickets for £289, and prices frozen, the only way to increase revenue in this area is to increase ticket pricing, which would not go down well with fans. We can’t have it both ways.

Commercial and sponsorship, including corporate hospitality sales, were also up by 35.7 per cent from £19m to £25.8m. This area includes the corporate hospitality called Club London which increased to 3,200 members and better sponsorship deals in the new stadium.

Moving on and retail and shop sales grew by 2 per cent from £9.3m to £9.6m, which again was a rather small increase but there are some mitigating factors here. The last year in the Boleyn Ground saw record revenue from retail from dedicated merchandise and the new club shop currently lacks a car park and has limited footfall or passing trade outside of match days. Still it’s disappointing growth for the new mega store and online trading arm.

Overall, the club published a gross profit of £64.4m but this reduced to a net profit of £43m after playing trading, taxation and interest. While the profit is impressive the club remains relatively cash poor as many transactions are paid for upfront but accounted for (depreciated) over many years in the accounts.

Excluding player disposals, West Ham’s earnings before interest and taxes (EBIT) profit was £11.4 million but still an improvement on the previous season’s EBIT loss of £3 million. Adding back the non-cash expenses in the form of depreciation and amortisation gives an EBITDA profit of £58 million, which is 77 per cent higher that the previous year’s £33m. It is this profit figure that many analysts use when valuing a business.

What else do the accounts show? They confirm the Boleyn Ground was sold for £38m. West Ham had already received £10m up front in previous years so the balance of £28m was paid in July 2016 by the developers. This was used mostly to pay off bank loans of £14.7m and London Stadium upfront fee of £15m. Wages also increased by 12 per cent from £84.6m to £95m which means wages account for 51.8 per cent of turnover. The highest paid director wages, believed to be West Ham Vice-Chairman Karren Brady, reduced her salary from £907,000 to £868,000. David Gold and David Sullivan did not draw a wage or claim any expenses.

The wages are only half of the story as we account for transfer fees over the life of their contracts. So when Marko Arnautovic signed for West Ham in 2016 for £24 million on a five year contract, this works out as an amortisation cost of £4.8 million (£24m/5 years) a year. The amortisation charge increased too, and if the two elements of player costs (wages and amortisation) are added together then West Ham have doubled their player running costs over the last five years from £70 million to £140 million.

Turning to West Ham loans and external bank loans totalling £14.7m to shareholders CB Holding (Icelandics) and (GC Co 102 Limited) David Sullivan were repaid on 15 July 2016 to make West Ham externally debt free of long-term non-shareholder loans. Interest was charged at under 5 per cent. The club re-paid their £30m short-term loan to Media Rights and Funding secured against TV money on 14 July 2017.

In August 2017 they took out two new short-term loans with Media Rights and Funding totalling £25m secured against the training grounds and stadium lease to help with cash flow. These loans are due for repayment in July 2018.

The shareholder loan balance was reduced from £49.2m to £45m in August 2016 after David Gold and David Sullivan were repaid £4.2m of their loans plus £2.2m in interest. Interest on shareholder loans totalled £12.7m in May 2017 but £10m of this was later paid back to David Gold and David Sullivan on 18 August 2017. The interest on the remaining balance has reduced from 7 per cent to 4 per cent from 1 April 2017 with the shareholder loan balance due for repayment on 1 January 2020.

The club’s interest cost worked out at £97,000 a week in 2017. Whilst this is a lower figure than the previous season, half of it went to shareholders, in the form of loans from Gold and Sullivan. This does mean that they strictly are correct in claiming never to have taken a penny as a wage from the club but do trouser around £50,000 a week in interest instead.

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